Understanding Amazon’s Success FactorsJanuary 16, 2018
Ecommerce is gobbling up a growing share of total retail sales in the U.S. There was an 86% increase in its overall retail market share in the past 5 years. As of Q3 2017, ecommerce nabbed 9.1% of retail market share in 2017. (Q4 2017 data will be available in February.)
Amazon accounts for 43% of all online retail sales in the U.S. and for 53% of all growth in US e-commerce sales.
Why do consumers choose Amazon?
Product selection, free shipping and price are the top 3 reasons. We explore a total of 5 reasons shoppers spend money on Amazon, outline key facts about Amazon’s growth and discuss competing with Amazon in this article.
Why People Hate Online Shopping
• 43% poor product description
• 20% lack of photos/videos
• 18% no product reviews
• 9% arrival time
• 7% not enough product reviews
• 3% no user-submitted content like photos/videos
• 58% paying for shipping
• 49% not being able to touch/feel/try a product first
• 34% difficult to return items
• 34% waiting for delivery
• 29% concerns about privacy
• 21% unattractive/difficult-to-navigate sites
• 19% entering payment info
• 10% overwhelming amount of products
• 9% not knowing where to search for a product
Amazon is seeing increases across its membership, sales and net income. We rounded up a few key numbers from a combination of online reports and Amazon’s 2016 annual report:
• 85% of consumers visit Amazon monthly but only 62% of consumers visit their families monthly
• 90 million US Prime members in 2017 which is a 39% increase from 2016
• Amazon has 300 million users
• 80% US consumers buy something from Amazon at least once a month & 20% buy something at least once a week
• 27% overall sales increase in 2016 with a 25% increase in North America sales from the previous year
• 32% of 2016 sales occurred during Q4
• 298% increase in net income in 2016 and a 66% increase in North America segment net income, or $936 million increase from 2015
• 69% shoppers browse on retail/brand sites then purchase on Amazon v. 31% of consumers who start on Amazon and visit the brand/retail site to complete a purchase
Why People Shop on Amazon
What induces customers to spend their money on Amazon? We came up with 5 reasons based on 2 Amazon-specific reports released in 2017.
1) Product Selection
• 57% of Amazon shoppers are looking for a specific product
• 63% of all shoppers know what they want before they started shopping
• Top Product Category Purchases on Amazon:
• 57% electronics
• 56% audio/video/books
• 39% toys/hobbies
• 37% clothing/accessories
• 28% housewares/furniture
• 25% sports/outdoors
• 24% beauty
• 20% hardware
• 13% automotive
• 10% jewelry
• 10% grocery
2) Free Shipping
• 84% of consumers say free shipping is why they buy from Amazon
• 82% of Prime members would cancel their prime account if it wasn’t for the free, two-day shipping
• smarterHQ research shows that free shipping is among the top reasons customers bought a product via Amazon over directly from the brand
• 6 in 10 shoppers start their path to purchase a product on Amazon because of better deals
• Consumers’ shopping preferences by price category:
• $1-$10 76% prefer Amazon
• $11-$52 86% prefer Amazon
• $26-$100 82% prefer Amazon
• $101-$200 65% prefer Amazon
• $201-$500 63% prefer retailer
• $501/up 66% prefer retailer
4) Relevant Content
• consumers rank the average star rating as the top review that helps trust a product, seller or service
• 1 in 3 shoppers say negative reviews are important for fostering trust in products and services
• 44% of customers buy from Amazon’s product recommendations
• customers engage and purchase most often from recommendations if items are less than $100
• 60% of shoppers start their purchase journey on Amazon because of better deals
5) Other Freebies
• 62% of customers say Free Returns were their reason for buying from Amazon
• 33% of customers cite Free Samples as the reason for buying from Amazon
Competing with Amazon
Like it or not, Amazon is (probably) competing with you.
“Our businesses are rapidly evolving and intensely competitive, and we have many competitors in different industries, including retail, e-commerce services, digital content and electronic devices, and web and infrastructure computing services,” Amazon said in its 2016 Annual Report.
Given the scope of Amazon’s reach (and revenue), we don’t advise comparing your benchmarks directly with Amazon’s performance. But now that we know what factors make Amazon successful, we can re-evaluate our own strategies to see which Amazon success factors we can apply to our own businesses.
Amazon occupies 43% of the ecommerce market. That leaves 57% of the ecommerce pie to other retailers. And that retail pie is growing.
Total retail U.S. ecommerce sales increased 14%, or $48,881 million increase, from 2016 to 2017. By 2022, online sales are expected to increase 56%, or by $228,843 million in the U.S. The average value of each online order in the U.S. is $86.30 per order.
So take some time before too much of 2018 passes to consider how you can claim your share of that retail pie.